Week 4 Practice Set -- calculating NPV_Karl Schutte

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Subject: accounting

See image for MACRS table 1) What is the Ending Book Value at the end of year 3 using MACRS: $    2) What is the Net cash flow from salvage at the end of year 3? $

Required information A company that manufactures magnetic flow meters expects to undertake a project that will have the cash flows estimated. First cost, $. Equipment replacement cost in year 2, $ Annual operating cost, $/year Salvage value, $ Life, years -870,000 -300,000 -920,000 250,000 4 At an interest rate of 10% per year, what is the equivalent annual cost of the project? Find the AW value using tabulated factors. The equivalent annual cost of the project is $-1

Page 1 of 1 HRM732 - Introduction to Financial & Management Accounting Case #4 - Due April 6, 2022 (Worth 10%) Lifetime Inc. wants to buy a new machine to be used in production that will replace an existing manual system. The cost of the new machine is $2,990,000. The equipment will last six years with no expected salvage value. The expected cash flows related to the implementation of the new machine is below. Year Cash Inflows Cash Outflows 1 $1,600,000 $950,000 2 1,600,000 950,000 3 1,600,000 950,000 4 1,600,000 950,000 5 1,600,000 950,000 6 1,600,000 950,000 Lifetime Inc’s required rate of return is 10% Required: c) Using both non-discounted and discounted capital budgeting approaches, determine if the company should replace the existing manual system with the purchase of this machine.

1/. The company ABC is considering two mutually exclusive investment programs which have a lifetime of two years. The cash flows of the two programs (in thousands of euros), as well as the corresponding probabilities of their realization are presented in the following tables: Year 0 Year 1 Cost Probability Cash Flow -400 Year 0 40% -700 60% Cost Probability Cash Flow 35% Year 1 65% TOPIC 1st INVESTMENT A 440 380 INVESTMENT B 480 Year 2 Potential Cash Flow 60% 40% 70% 30% 340 Chance Year 2 40% 60% 55% 45% 460 420 410 360 Cash Flow 490 480 380 330 AV. Consider, based on the criterion of Expected Net Present Value, which of the two investments would you choose, given that the weighted average cost of capital in the case of Investment A is estimated at 10%, Investment B at 8%, while the risk-free rate is 3%. B/. Let's say at the end of the first year a prospective buyer comes along and makes an offer to buy the investment you chose to implement in question a/. According to his offer, he…

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MNO company is evaluating a proposal for purchase of equipment which will cost $180,000. The cash inflows from the use of equipment is given below: Year Cash flow $60,000 $40,000 $70,000 $125,000 $35,000 4. Payback period for the proposal is: a. 3 years b. 2 years c. 4 years d. 3.08 years DELL 123 45

MNO company is evaluating a proposal for purchase of equipment which will cost $180,000. The cash inflows from the use of equipment is given below: Year Cash flow $60,000 $40,000 S70,000 $125,000 $35,000 1 3 4 Payback period for the proposal is: а. 3 years b. 2 years c. 4 years d. 3.08 years

Consider the following information: Initial cost of equipment $108,000 Sales tax and delivery costs $7,000 Estimated life 7 years Salvage value $11,000 Annual cash inflows $31,000 Estimated cost of capital 10% Without considering the effect of income taxes, the net present value of the equipment is: O $48,566. $41,566. $39,921. $42,921.

Subject:: acc

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Answer using excel and make sure answer is correct. here is the data only answer based on this

QUESTION 5 Use the information provided below to answer the following questions. Where applicable, use the present value tables provided in APPENDICES 1 and 2 that appear after QUESTION 5. 5.1 5.2 5.3 5.4 5.5 Calculate the Payback Period of both machines (expressed in years, months and days.) Which machine should be chosen on the basis of payback period only? Why? Calculate the Accounting Rate of Return (on average investment) of Machine A (expressed to two decimal places). Calculate the Net Present Value of each machine (amounts expressed to the nearest Rand.) Calculate the Internal Rate of Return of Machine B (expressed to two decimal places) using interpolation.

Q5) For the cash flows shown, determine which service alternative should be selected? Assume that the interest rate = 10% per year A B Initial cost, $ 300,000 600,000 Annual cost, $/year 30,000 Annual cost started at 22,000 year 4, $/year Extra cost every 6 40,000 years, S Cost started at year 4 10,000 to 8 Salvage value, $ 30,000 110,000 Life, Years 8 8 1- Capitalized cost (CC) of Alternative A: A) -493,766 B)-473,766 C)-482,010 D) -461,421 E)-453,730 2- Capitalizes cost (CC) of alternative B: A)-851,844 B)-920,056 C) -875,631 D) -951,844 E)-984,008 3- Which alternative will be selected on the basis of their capitalized cost analyses? Justify your answer.

Vista Limited intends purchasing a new machine and has a choice between the following two machines:Equipment AEquipment BInitial costR220 000R240 000Expected useful life5 years5 yearsScrap valueNilNilExpected net cash inflows:RREnd of:Year 155 00070 000Year 260 00070 000Year 362 00070 000Year 460 00070 000Year 570 00070 000The company estimates that its cost of capital is 12%. Required:2.1 Calculate the Payback Period of both equipment. (Answers must be expressed in years, months and days). 2.2 Calculate the Accounting Rate of Return (on initial investment) for both equipment A and B. (Answers must be expressed to 2 decimal places).  2.3 Calculate the Net Present Value of each equipment. (Round off amounts to the nearest Rand.)  2.4 Calculate the Internal Rate of Return of Equipment B.

Compute the annual-equivalence amount for the following cash flow series at i = 12% $1.600 S1.600 $800 SH00 S800 $500 $500 $1.000 You invest in a piece of equipment costing $50,000. The equipment will be used for two years, and it will be worth $20,000 at the end of three years. The machine will be used for 4,000 hours during the first year, 6,000 hours during the second year, and 5,000 hours during the third year. The expected savings associated with the use of the piece of equipment will be $28,000 during the first year, $40,000 during the second year, and $35,000 during the third year. Your interest rate is 12%. (a) What is the capital recovery cost? (b) What is the annual equivalent worth? (c) What is net savings generated per machine-hour?

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Quiz 2: Select the best alternative plan from the table below using the Annual worth analysis (AW). (Draw the cash flow diagram) Annual Salvage Life time i- (years) Other First Cost (Present) Operating cost (AOC) Plan value payments - $ 800,000 - $(mn*1000) $ 200,000 $ 26,400 8. 4% -$ 23,000 Every 7 -$ 2,800,000 Infinity 4% - $ 16,000 (forever) - $(mn*1000) years $2,000,000 -$(mn*1000) 31 4% $12,000 Select the best alternative plan from the table below using the Annual worth analysis (AW). (Draw the cash flow diagram)

Q1: For the machines indicated below. Consider i= 10% per year First cost Annual cost Salvage value Life duration Machine A 20,000 $ 5,000 $ 7,500 $ 3 Machine B 25,000 4,000 6,000 4 A- Draw cash flow diagram for each machine for one cycle of each project B- Draw cash flow diagram for each project considering the LCM life cycle (Hint: different project duration, need to have the LCM life cycle) C- Compare the machines to select best alternative one based on Present worth analysis method D- Repeat part B considering Future worth analysis

Q3: The following table gives the operation cost, maintenance cost and salvage value at the end of every year of a machine whose purchase value is 25,000$. Find the economic life of the machine assuming interest rate, i = 15%. End of Year (n) 1 2 3 4 5 6 7 8 9 10 Cost operation at the end of year ($) 3000 4000 5000 6000 7000 8000 9000 10000 11000 12000 Maintenance cost at the end of year ($) 300 400 500 600 700 800 900 1000 1100 1200 Salvage value ate end of the year ($) 9000 8000 7000 6000 5000 4000 3000 2000 1000 500